It’s been an interesting year for the world of talent acquisition. Statistics are showing a decline in vacancies, but at the same time, employers are struggling to recruit for core skills. The labour market remains tight and the power is still in the hands of the candidates. Added to this complexity is the growth in tech and AI innovation, which is changing both the skills that businesses need and the tools that HR can use to attract talent.

As preparations begin for 2025 amidst the growing complexity of the world of work and employment (particularly in light of the Employment Rights Bill and the plans unveiled in the Budget), HR is looking for the data to inform workforce strategies.

According to our 2025 Salary Guide (a study of hiring and pay intentions), next year looks more promising for HR, but it won’t be without its challenges.

What are the core hiring and pay trends for the New Year?

The data suggest that, following a rather disruptive year, hiring plans for 2025 are set for an uptick. In fact, nearly two in five business leaders plan to increase headcount in the coming months. Given the growing skills gaps that continue to plague the UK, the core question is how to best attract the talent needed. Many, it would appear, intend to focus on high-quality compensation packages as a tool for acquisition and retention.

According to our report, 46% of companies plan to increase salaries in 2025. This is most notable in the tech and IT sector, where a third (34%) of employers say they would increase salaries to stay competitive in the hiring market and attract skilled talent. While this may be the case, there is seemingly a disconnect between workers and employers in regards to what matters more. Although business leaders are focusing on financial incentives, almost half (43%) of workers revealed that they would prioritise job security over salary increases, as the uncertain economic landscape creates a growing need for stability.

Generational nuances

This disconnect extends to more than just employees and their employers though: generations of the workforce are also at odds with each other. Although all four workplace generations have increased salary expectations overall, Gen Z appears to be the most demanding, with 67% of employers agreeing that their expectations have risen since last year. Millennials follow close behind at 64%, which could indicate how severely the cost-of-living crisis impacts these two emerging generations.

In comparison, only 37% of employers feel that Gen X have become more demanding where salary is concerned. Baby Boomers represent a more nuanced point of view from the employer perspective, with 22% saying they’re more demanding and 21% saying they’re less demanding.

Flexible benefits being utilised in attraction

Remuneration is about more than just pay packets, though, and employers are increasingly recognising the need to offer a more robust benefits package as well. Interestingly almost half of employers (43%) currently offer flexible benefits, and a further 29% plan to introduce them next year, making this one of the top perks for attracting talent and mitigating the ongoing skills shortages. It also remains one of the most-requested worker perks, with 39% of employees saying they’d like to see this offered in the future.

Although workers are also interested in stress reduction programmes as part of their remuneration package (an addition that could improve productivity and retention rates), they did indicate a desire for benefits that help ease the burden of growing living costs. These include financial support for remote work (50%), a 13-month salary (48%), and benefits which help support daily life (such as fuel allowances, meal vouchers, and subsidised public transport).

Hybrid working will become more divisive

The hybrid / remote / in-office debate continues to rage on and it may be some time before a happy medium is agreed. However, employers remain set on the belief that there’s a strong correlation between high employee productivity and their presence in the office. Nearly half of the businesses we surveyed (45%) have already mandated set ‘in office’ days to improve productivity, with 28% planning to follow suit next year.

Despite this belief that in-office days increase productivity, workers disagree. Almost three-quarters (73%) feel hybrid working positively impacts their productivity. To underscore the division in opinions between workers and employers further, 34% of workers believe working full-time in the office would negatively impact their productivity, and only 9% believe the same is true of hybrid working.

The view from business leaders that in-office attendance is necessary is seemingly having an impact on professional development in work. In fact, our data suggests that there’s a correlation between an employee’s physical presence in the office and their chances of advancement. Over a third (68%) of employers admitted that an employee’s physical presence in the office significantly impacts their promotion chances.

However, this isn’t an entirely effective way to encourage employees to relinquish time spent working from home. Where 42% of employees would increase their presence if their employer suggested it might impact their chances of a promotion, 23% said they’d look for a new job, and 21% would do nothing, as working from home is more important to them than a promotion.

Automation and AI will be used to increase productivity

AI and automation now sit as one of the top business-critical priorities for the next 12 months. Nearly three-quarters of UK employers (72%) plan to encourage employees to explore generative AI tools to help streamline routine tasks and improve productivity next year. Similarly, 44% of businesses will implement automation and digital transformation initiatives to help boost productivity. Workers are, broadly speaking, optimistic about the role that technology will play in their daily work. Overall, 60% believe AI will positively impact their careers and skills, especially workers in tech and IT (67%) and marketing and creative (65%). But in order to help talent pools best adapt to maximise the opportunities that these tools present, training and development is needed.

The hiring landscape is still plagued by ongoing skills shortage, particularly in STEM remits, and this has only widened due to the rapid pace of technological advancement. At present, 65% of employers offer in-house training, and 52% have implemented training and development opportunities to increase productivity.

Workers are also taking their development into their own hands; 43% are pursuing paid time off for external learning or external training paid for by their employer (40%). Although steady steps are being made towards closing the gap for good, it’s an issue that requires additional support from Government and educational facilities to ensure the UK economy has the skills it needs to thrive.

The statistics suggest that 2025 is going to be another interesting year for HR teams. However, while there may be a number of challenges to navigate, there are also plenty of opportunities. Whether that’s tapping into the power of technology or strengthening talent attraction strategies by adapting to the needs of a multi-generational workforce, next year could be the time to really demonstrate the true business value of HR.